Stock Market News

Deutsche Bank has cut its recommendation for home furnishings retailer Carpetright from 'sell' to 'hold', saying that the stock is pricing in too much of a recovery.

The bank highlighted that the shares are now sitting 7% above the level seen before the company's latest profit warning on March 26th and a "pricing in perfection".

"Although the operational gearing is very high and profit growth is likely to be powerful if the historical linkage with housing comes through, we estimate the share price already discounts 10-year profit growth of circa 25% per annum," Deutsche Bank said.

"Having upgraded to 'hold' in December, and with 13% downside implied by our target price, we now reverse this and downgrade to 'sell'."

The bank's 545p target price for the stock has been left unchanged.

Deutsche Bank labelled Carpetright's March update as "disappointing", after the company said that profits would be below market forecasts as the anticipated pick-up in sales from improved housing data had not materialised.

"Given the historical relationship between Carpetright's like-for-like sales and mortgage approvals, we expect sales to improve, though not until after the difficult Easter comparative."

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